Pool Corporation

Company Overview

Business Model: Pool Corporation is the world’s largest wholesale distributor of swimming pool supplies, equipment, and related leisure products, and a leading distributor of irrigation and landscape maintenance products in the United States. The Company operates through 456 sales centers across North America, Europe, and Australia, serving a fragmented customer base of approximately 125,000 pool builders, pool service companies, retail stores, commercial pool operators, and landscape contractors. Pool Corporation adds value by efficiently distributing over 200,000 manufacturer, proprietary, and exclusive brand products, offering competitive pricing, broad selection, and value-added support. Revenue generation is primarily driven by recurring maintenance and minor repair of existing pools (64% of 2025 sales), pool remodeling, renovations, and upgrades (22%), and new pool construction (14%).

Market Position: Pool Corporation holds a leading position as the largest wholesale distributor in the swimming pool and related backyard products industry and is one of the only national wholesale distributors focused on this sector in the United States. It is also a leading distributor of irrigation and landscape maintenance products. The Company operates in a fragmented industry, leveraging its scale and service excellence to be a preferred partner for small, entrepreneurial businesses. Key competitive factors include product breadth and availability, customer service quality (including online access and delivery speed), sales and marketing programs, consistent business relationships, competitive pricing, and geographic proximity to customers.

Recent Strategic Developments:

• Digital Transformation: Ongoing investments in digital transformation and technology, including the POOL360 digital ecosystem (POOL360 WaterTest, POOL360 PoolService mobile application, POOL360 B2B platform), to enhance customer experience, operational efficiency, and capacity creation.
• Product Expansion: Continuous expansion of product offerings, particularly energy-efficient and environmentally friendly products (variable speed pumps, LED lights, high-efficiency heat pumps, organic fertilizers/pesticides), and proprietary/exclusive brands (Regal, E-Z Clor, SuperPro, PoolStyle).
• Commercial Market Focus: Increased focus on the commercial swimming pool market, designating four commercial warehouses in 2025 to serve large commercial installations more efficiently.
• Geographic Expansion & Acquisitions: Opened 8 new sales centers and acquired 3 locations in 2025, including Vegas Stone Brokers (Nevada), Great Plains Supply and Spa Products (Kansas, Texas), and in 2024, Swimline Distributors, Inc. (Georgia) and Shoreline Pool Distribution (Mississippi). The Company plans to open 5 to 8 new sales centers in 2026.
• NPT Network Development: Ongoing development of the National Pool Trends (NPT) network for swimming pool tile, decking materials, and interior pool surfacing products, with 19 dedicated NPT sales centers and 124 SCP and Superior sales centers featuring consumer showrooms.

Geographic Footprint: As of December 31, 2025, Pool Corporation operated 456 sales centers across North America, Europe, and Australia.

• North America: 408 sales centers (United States: 408, Canada: 17, Mexico: 5).
• Europe: 9 sales centers in France, 3 in Portugal, 2 in Italy, 2 in Spain, 1 in Belgium, 1 in Croatia, 1 in Germany (total 19).
• Australia: 6 sales centers.
• Revenue Distribution (2025): Approximately 95% of sales in North America (including Canada and Mexico), 4% in Europe, and less than 1% in Australia.
• Key U.S. Markets: California, Florida, Texas, and Arizona collectively represented approximately 53% of 2025 net sales.

Financial Performance

Revenue Analysis

Profitability Metrics (2025):

• Gross Margin: 29.7%
• Operating Margin: 11.0%
• Net Margin: 7.7%

Investment in Growth:

• R&D Expenditure: Not explicitly disclosed as a separate line item.
• Capital Expenditures: $56.3 million (net of sales of property and equipment)
• Strategic Investments: $10.8 million for business acquisitions (net of cash acquired).

Business Segment Analysis

Pool Corporation operates as a single reportable segment, as all sales centers have similar operations and economic characteristics. The Company's chief operating decision maker evaluates each sales center based on individual financial and operational measures, including operating income, accounts receivable, and inventory management.

Overall Segment Financial Performance (2025):

• Revenue: $5,289.4 million (-0.4% YoY)
• Gross Profit: $1,572.5 million (-0.2% YoY)
• Operating Income: $580.2 million (-6.0% YoY)
• Operating Margin: 11.0%

Key Growth Drivers:

• Stable Maintenance Demand: Recurring maintenance and minor repair of existing pool installations (64% of 2025 sales) provided stable demand for non-discretionary products.
• Inflationary Product Cost Increases: Sales benefited approximately 2% to 3% from inflationary product cost increases in 2025, partially offset by 1% price deflation on some items.
• Outdoor Living Trend: Continued homeowner investment in outdoor living spaces, including backyard renovations, driven by steady increases in home values and increased mortgage rates encouraging longer homeownership.
• Technological Advancements: Demand for automation, control products, and energy-efficient/sustainable products.

Product Portfolio: Pool Corporation offers over 200,000 products across more than 700 product lines and approximately 40 product categories.

• Pool & Hot Tub Chemicals: Represented approximately 14% of total net sales in 2025.
• Equipment: Sales of equipment for maintenance, renovation, and new construction (heaters, pumps, lights, filters, automation devices) were flat compared to 2024, representing approximately 31% of net sales in 2025.
• Building Materials: Primarily used in new pool construction and remodeling, sales were comparable to 2024, representing approximately 12% of net sales in 2025.
• Irrigation and Landscape Maintenance Products: Includes irrigation system components, professional turf care equipment, and supplies.
• Proprietary and Exclusive Brands: Recently expanded lines include Regal, E-Z Clor, SuperPro, and PoolStyle.

Market Dynamics:

• Installed Base: Services over 14.0 million swimming pools and hot tubs in the United States, including approximately 5.5 million in-ground pools. The aging installed base drives demand for remodeling, equipment replacement, and upgrades.
• New Pool Construction: Estimated to have decreased 3% to 5% from 62,000 units in 2024 to just below 60,000 units in 2025, primarily due to cautious consumer discretionary spending and elevated financing costs.
• Economic Sensitivity: Remodel, renovation, and upgrade markets are sensitive to economic factors like home values, existing single-family home sales, and consumer confidence. New pool demand is driven by perceived benefits of ownership and competes with other discretionary consumer purchases.

Distribution Networks:

• SCP Distributors (SCP): Operates 272 sales centers (224 domestic, 48 international).
• Superior Pool Products (Superior): Operates 75 sales centers (all domestic).
• Horizon Distributors (Horizon): Operates 88 sales centers (all domestic), focusing on irrigation and landscape maintenance products.
• National Pool Trends (NPT): Operates 19 dedicated sales centers (all domestic), specializing in swimming pool tile, decking materials, and interior pool surfacing products. Additionally, 124 SCP and Superior sales centers feature NPT consumer showrooms.
• Sun Wholesale Supply (Sun Wholesale): Operates 2 sales centers (all domestic), primarily servicing independently owned and operated Pinch A Penny franchise locations and operating a specialty chemical re-packaging plant.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $346.3 million in 2025 (1,271,000 shares net of retirements). As of February 20, 2026, $331.0 million remained available under the current share repurchase program.
• Dividend Payments: $184.9 million in 2025.
• Dividend Yield: Not explicitly stated, but cash dividends declared per common share were $4.95 in 2025.
• Future Capital Return Commitments: The Board may declare future dividends at its discretion. Share repurchases are discretionary and may be suspended or discontinued.

Balance Sheet Position (as of December 31, 2025):

• Cash and Equivalents: $105.0 million
• Total Debt: $1,199.5 million
• Net Cash Position: -$1,094.5 million (Net Debt)
• Credit Rating: Not disclosed in the filing.
• Debt Maturity Profile:
  • Less than 1 year: $187.5 million
  • 1-3 years: $14.8 million
  • 3-5 years: $29.5 million
  • More than 5 years: $970.9 million (primarily due September 30, 2029)

Cash Flow Generation (2025):

• Operating Cash Flow: $365.9 million
• Free Cash Flow: $309.6 million (Operating Cash Flow of $365.9 million - Purchases of property and equipment, net of sales of $56.3 million)
• Cash Conversion Metrics (as of December 31, 2025, trailing four quarters basis):
  • Days Sales Outstanding: 26.3 days (consistent with 2024)
  • Inventory Turns: 2.7 times (down from 2.8 times in 2024)

Operational Excellence

Production & Service Model: Pool Corporation operates as a wholesale distributor, purchasing products from a large number of manufacturers and distributing them to a fragmented customer base. The operational philosophy focuses on high levels of customer service, efficient distribution, and value-added support. This includes offering a broad product assortment, conveniently located sales centers, comprehensive support programs, in-depth training, and tailored advertising programs.

Supply Chain Architecture: The Company utilizes a network of 456 sales centers and four centralized shipping locations (CSLs) in the United States and one in Europe to redistribute bulk-purchased products to sales centers or directly to customers. Sales centers maintain well-stocked inventories, optimized by warehouse management technology.

Key Suppliers & Partners:

• Primary Suppliers: Pentair plc (20% of cost of products sold in 2025), Zodiac Pool Systems, Inc. (12%), and Hayward Holdings, Inc. (11%).
• Vendor Programs: Engages in preferred vendor programs and early buy programs, which offer seasonal terms and modest discounts, to optimize profitability and inventory investments.
• Technology Partners: Collaborates with third-party providers for cybersecurity and other IT services.

Facility Network:

• Corporate Offices: Leases approximately 60,000 square feet in Covington, Louisiana.
• Manufacturing/Re-packaging: Owns a chemical re-packaging plant in Florida (approximately 105,000 square feet).
• Sales Centers: Owns 15 sales center facilities and leases the majority of its other 441 sales centers. Sales centers range from 2,000 to 95,000 square feet, typically including warehouse, counter, display, and office space.
• Centralized Shipping Locations (CSLs): Operates 5 CSLs (4 U.S., 1 Europe) ranging from 115,000 to 185,000 square feet.
• R&D: Not explicitly detailed as separate facilities, but innovation is a core focus.

Operational Metrics:

• Sales Centers: 456 as of December 31, 2025 (up from 448 in 2024), including 8 new openings and 3 acquisitions in 2025, offset by 3 consolidations/closures.
• Inventory Management: Inventory balance increased 13% to $1.5 billion at December 31, 2025, driven by increased purchasing ahead of price increases and inflation. Inventory turns were 2.7 times in 2025.
• Receivables Management: Days sales outstanding ratio was 26.3 days at December 31, 2025.

Market Access & Customer Relationships

Go-to-Market Strategy: Pool Corporation's strategy involves promoting industry growth through advertising and promotional programs (e.g., www.swimmingpool.com®, www.hottubs.com®, www.nptpool.com®, Regal and E-Z Clor Pool Care mobile apps), and supporting customer business growth through broad product assortment, conveniently located sales centers, comprehensive support programs (e.g., EDGE Marketing Portal, in-depth training), and product/market expertise.

Distribution Channels:

• Direct Sales: Local sales personnel work from sales centers as trusted resources for customers.
• Channel Partners: Serves specialty retailers, including independently owned and operated Pinch A Penny franchise stores through Sun Wholesale Supply.
• Digital Platforms: Utilizes B2B internet and mobile platforms (POOL360, Horizon 24/7) for digital review and ordering, and the BlueStreak mobile ordering platform for sales associates.

Customer Portfolio:

• Total Customers: Approximately 125,000 customers.
• Customer Profile: Majority are small, entrepreneurial, family-owned businesses (independent contractors, professional pool servicers, specialty retailers).
• Customer Concentration: No single customer represented 10% or more of 2025 sales, indicating a well-diversified customer base.
• Key Customer Types: Swimming pool remodelers and builders, specialty retailers, swimming pool repair and service businesses, irrigation construction and landscape maintenance contractors, and commercial pool operators.

Geographic Revenue Distribution (2025):

• United States: $4,900.5 million (92.6% of total revenue)
• International: $388.9 million (7.4% of total revenue)
• Growth Markets: Focus on the Sunbelt region in the U.S. for irrigation and landscape maintenance. Continued expansion both domestically and internationally is expected.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: Pool Corporation operates in the outdoor living industry, which includes servicing over 14.0 million swimming pools and hot tubs in the United States. The industry is fragmented, with low barriers to entry. Long-term growth is anticipated due to increased penetration of new pools, continuous maintenance requirements, and periodic remodeling/equipment replacement as the installed base ages. Favorable demographic trends include population migration to warmer climates, increased homeowner spending on outdoor living spaces, healthy home equity levels, and increased demand for automation, higher quality materials, and sustainable/energy-efficient products.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Pool Corporation faces intense competition from many regional and local distributors, and a limited number of other national wholesale distributors.

• Competitive Overlap: Competition is particularly concentrated in high pool density markets like California, Florida, Texas, and Arizona, which represent 53% of the Company's net sales.

Emerging Competitive Threats:

• Mass Market Retailers: Direct and indirect competition from store-based and internet-based mass market retailers, who primarily buy directly from manufacturers. An increased focus by these retailers on pool/irrigation products could intensify competition.
• Internet Retailers: Online ordering, price transparency, and comparison shopping facilitated by the internet could increase competition and reduce margins.
• Alternative Leisure Products: Indirect competition from other big-ticket discretionary leisure purchases (e.g., boats, motor homes) and other home/backyard remodelers.

Competitive Response Strategy: Pool Corporation's strategy includes:

• Market Share Gains: Realizing sales growth through market share gains and continued expansion of product offerings, particularly proprietary and exclusive brands.
• Customer Service Excellence: Maintaining high customer service levels, broad product selection, and value-added support.
• Digital Innovation: Investing in digital transformation to improve customer experience and operational efficiency.
• Geographic and Product Expansion: Strategic acquisitions and new sales center openings to penetrate existing markets and expand into new geographic markets and product categories.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Economic Conditions & Discretionary Spending: Demand for products is highly sensitive to general economic conditions, housing market trends, interest rates, inflation, disposable income, and consumer confidence. Declines in discretionary spending, particularly for new pool construction and major renovations, can adversely impact sales.
• Housing Market Downturns: Severe or prolonged downturns in the housing market could lead to customer closures/bankruptcies and reduced demand for new installations and major projects.
• Weather Conditions: Business is highly seasonal, with 61% of net sales and 78% of operating income generated in Q2 and Q3 (peak season). Unfavorable weather (e.g., unseasonably cool, excessive precipitation, drought, natural disasters) in key regions can significantly impact results, reducing installations, maintenance demand, and impulse purchases.
• Technology Disruption: Rapid technological advancements could lead to product obsolescence or shifts in consumer preferences.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: High reliance on favorable and stable relationships with key suppliers (Pentair plc, Zodiac Pool Systems, Inc., Hayward Holdings, Inc.). A decision by these suppliers to bypass distributors or disruptions in their operations could increase supply costs or delay product availability.
• Product Quality & Safety: Failure to maintain high product and service quality or safety standards could damage reputation, lead to litigation, and impact financial performance (e.g., product recalls).
• Inventory Management: Risks of lost sales from insufficient inventory or negative impact on gross margin from excess/obsolete inventory due to inaccurate demand forecasting or changing consumer preferences.
• Personnel Attraction & Retention: Dependence on attracting, developing, and retaining qualified personnel, including executive officers and key management. Competition for talent, uncompetitive compensation, or increased employee expectations for workplace flexibility could adversely affect operations.

Financial & Regulatory Risks

Market & Financial Risks:

• Interest Rate Fluctuations: Exposure to changes in short-term interest rates due to variable rate debt, despite interest rate swap contracts. Increased interest rates could reduce profitability and cash flows.
• Tax Law Changes: Changes in tax laws, policies, rates, or interpretations (e.g., OBBBA, GILTI, Pillar Two) can cause fluctuations in the effective tax rate and increase compliance costs.
• Dividend & Repurchase Policy: No assurance of continued dividend payments or share repurchases at current rates or at all, as these are discretionary and subject to Board approval and financial conditions.
• Internal Control Deficiencies: Lapses in disclosure controls and procedures or internal control over financial reporting could materially and adversely affect the Company.

Regulatory & Compliance Risks:

• Government Regulations: Subject to a wide variety of local, federal, state, and international regulations (e.g., environmental, health, safety, transportation, employment, pesticide laws). Changes or expanded enforcement could increase costs of doing business.
• Climate-Related Regulations: New or increased legal/regulatory requirements to address changing climate patterns could increase compliance obligations, affect product availability/cost, or require operational modifications.
• Data Privacy Laws: Evolving and complex data privacy regulations (e.g., CCPA, EU regulations) pose risks of non-compliance, fines, litigation, and reputational damage.

Geopolitical & External Risks

Geopolitical Exposure:

• International Operations: Operations in Canada, Mexico, Europe, and Australia expose the Company to risks such as political/economic instability, local laws/customs, currency fluctuations, adverse tax consequences, and anti-corruption/sanctions laws.
• Trade Relations: Major changes in import/export regulations, trade restrictions, or tariffs could adversely affect business, results of operations, and costs.
• Catastrophic Events: Outbreaks of disease, terrorism, wars, civil disturbances, or natural disasters (e.g., hurricanes, droughts, wildfires) could disrupt operations, supply chains, workforce, or depress macroeconomic conditions.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Digital Transformation: Significant ongoing investment in digital transformation initiatives to improve customer experience and operational efficiency.
• E-commerce & Mobile Platforms: Development of B2B internet and mobile platforms (POOL360, Horizon 24/7, BlueStreak) for ordering and customer service.
• Software Applications: Creation of professional water testing software (POOL360 WaterTest) and a mobile application for pool service management (POOL360 PoolService CRM tool).
• Sustainable Products: Focus on offering energy-efficient and environmentally friendly products (variable speed pumps, LED lights, high-efficiency heat pumps, organic fertilizers/pesticides).
• Innovation Pipeline: Plans to continue expanding POOL360 technologies and introduce new product categories each year in select markets.

Intellectual Property Portfolio:

• Patent Strategy: Maintains domestic and foreign registered trademarks and patents, primarily for proprietary and exclusive brand products (e.g., Regal, E-Z Clor, SuperPro, PoolStyle).
• Domain Names: Owns rights to numerous internet domain names (e.g., www.swimmingpool.com®, www.hottubs.com®, www.nptpool.com®).
• IP Litigation: Not explicitly mentioned as material in the filing.

Technology Partnerships:

• Strategic Alliances: Not explicitly named, but the Company leverages technological solutions to enhance capacity creation and works with third-party security operations centers (SOC) and other industry-leading third-party providers for cybersecurity.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company's future success depends on its ability to attract, retain, and motivate qualified personnel, including executive officers and key management. Succession planning is a focus area.

Board Composition: The Board of Directors is responsible for oversight of risk management programs, including cybersecurity. The Audit Committee assists the Board in reviewing cybersecurity and other information technology risks, controls, and procedures. The Compensation and Human Capital Management Committee designs compensation programs.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 6,000 people at December 31, 2025.
• Geographic Distribution: Approximately 90% of employees were located in the U.S.
• Skill Mix: Not explicitly detailed, but includes sales, operations, and technical roles.
• Seasonal Employment: Adds 100 to 200 employees during the peak summer season.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Focuses on recruiting, developing, and retaining a dynamic workforce.
• Retention Metrics: Not explicitly disclosed, but the Company strives to be an "Employer of Choice" through competitive pay, benefits, training, and professional development.
• Employee Value Proposition: Offers market-driven compensation (base salary, incentive/bonus payments), health and disability plans, retirement plans with company match, paid time off, equity grants (for certain roles), employee stock purchase plan, tuition reimbursement, scholarships for dependents, and financial wellness programs.

Diversity & Development:

• Diversity Metrics: Strives to attract and retain talent by building an inclusive culture where all voices are heard and valued.
• Development Programs: Emphasizes continuous training and career development, including annual performance reviews, succession planning, safety and security protocols, new product training, and managerial training (e.g., recruitment best practices, effective communications).
• Entry-Level Training: Provides a Manager in Training (MIT) program to build a pipeline for field leadership.
• Culture & Engagement: Supports employees with training and development opportunities, including content aimed at creating and sustaining an inclusive environment, and has established a mentoring program.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Energy Efficiency: Promotes and offers energy-efficient and environmentally friendly products (variable speed pumps, LED pool and hot tub lights, high-efficiency heat pumps) to help pool owners save energy, water, time, and money.
• Water Conservation: Horizon sales centers offer irrigation and drainage products that reduce water usage and soil erosion.
• Emissions Targets: Not explicitly disclosed.
• Carbon Neutrality: Not explicitly disclosed.
• Renewable Energy: Not explicitly disclosed.

Supply Chain Sustainability:

• Responsible Sourcing: Not explicitly detailed, but the Company evaluates supplier relationships and considers alternate sourcing to ensure competitive cost, service, and quality standards.

Social Impact Initiatives:

• Community Investment: Employees contribute time and talents to various outreach programs, including disaster relief and local food banks.
• SWiMPACT!: A Company program that provides water safety lessons to underserved children through partnerships with YMCAs.
• Product Impact: Focuses on products that support sustainability and enhance outdoor living.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Business is seasonal, with sales and operating income highest during the second and third quarters (peak months for pool use, installation, and irrigation/landscape activities). Sales are lower in the first and fourth quarters. In 2025, 61% of net sales and 78% of operating income were generated in Q2 and Q3.
• Economic Sensitivity: Demand for new pools, irrigation systems, and major renovations is sensitive to economic conditions, housing market trends, interest rates, and consumer confidence. Non-discretionary maintenance and minor repair sales are more stable.
• Industry Cycles: The industry experiences cycles tied to new home construction and remodeling, which have moderated since late 2022 due to higher interest rates and inflation.
• Weather Sensitivity: Weather is a principal external factor. Hot and dry weather increases chemical/supply purchases and above-ground pool sales. Unseasonably cool/wet weather or extraordinary amounts of precipitation decrease installations and purchases. Early warming trends extend the season, while late warming trends shorten it.

Planning & Forecasting:

• Inventory Management: Typically experiences a build-up of product inventories during winter months in anticipation of the peak selling season.
• Demand Forecasting: Management's outlook for 2026 is based on reasonable expectations for industry demand, pricing, and inflationary conditions, assuming normal weather patterns.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Environmental & Health/Safety: Subject to local fire codes and international, federal, state, and local environmental and health and safety requirements (e.g., EPA, CPSC, DOT, OSHA, NFPA, IMO). These govern packaging, labeling, handling, transportation, storage, and sale of chemicals and fertilizers.
• Pesticide Regulation: Sells algaecides and pest control products regulated as pesticides under FIFRA and state laws, primarily relating to labeling, annual registration, and licensing.
• International Compliance: Subject to local laws and customs in international operating regions.

Trade & Export Controls:

• Import/Export Regulations: Sourcing certain products internationally exposes the Company to major changes in tax policy, import/export regulations, trade restrictions, or tariffs.
• Sanctions Compliance: Subject to economic sanctions and other laws governing international commerce.

Legal Proceedings:

• Material Litigation: From time to time, the Company is subject to various claims and litigation in the ordinary course of business (product liability, personal injury, commercial, contract, employment matters). As of December 31, 2025, the Company does not believe the ultimate resolution of any of these matters will have a material adverse impact on its financial condition, results of operations, or cash flows.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate (2025): 23.8% (24.7% excluding ASU 2016-09 tax benefit).
• Effective Tax Rate Drivers: Primarily influenced by U.S. federal statutory rate (21.0%), state and local income taxes (net of federal income tax benefit), foreign tax effects, and excess tax benefits on share-based payments.
• GILTI: Records Global Intangible Low Tax Income (GILTI) on foreign earnings as period costs if and when incurred; no material impacts since 2017 enactment.
• Tax Loss Carryforwards: Certain international subsidiaries had tax loss carryforwards totaling approximately $11.0 million at December 31, 2025, with a corresponding valuation allowance of $2.7 million.
• Unrecognized Tax Benefits: Total unrecognized tax benefits that would decrease the effective tax rate were $16.5 million at December 31, 2025.

Geographic Tax Planning:

• Foreign Earnings: U.S. income taxes are not provided on undistributed earnings or cash balances of foreign subsidiaries, as these are historically invested or expected to be invested indefinitely to fund current cash flow needs in those countries.
• International Tax Structure: Operates in 41 states, 1 U.S. territory, and 11 foreign countries, subject to audits by various tax authorities.

Tax Reform Impact:

• One Big Beautiful Bill Act (OBBBA): Signed into U.S. law on July 4, 2025, but the Company currently does not expect it to have a material impact on its income tax provision.
• Pillar Two: Several operating countries adopted Global Anti-Base Erosion Model Rules (Pillar Two) in 2024, but this did not have a material effect on the Company's financial statements.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Self-insured for employee health benefits, workers’ compensation, property and casualty, and automobile insurance. Maintains excess and aggregate liability coverage to limit exposure.
• Risk Transfer Mechanisms: Utilizes interest rate swap contracts to reduce exposure to fluctuations in variable interest rates on a portion of its variable rate borrowings.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: The business is highly seasonal. Sales and operating income are highest during the second and third quarters, which are the peak months for swimming pool use, installation, and irrigation/landscape activities. Sales are lower during the first and fourth quarters. In 2025, approximately 61% of net sales and 78% of operating income were generated in the second and third quarters.
• Economic Sensitivity: Demand for new pools, irrigation systems, and major renovation projects is sensitive to general economic conditions, housing market trends, interest rates, and consumer discretionary spending. Non-discretionary maintenance and minor repair sales are more consistent.
• Industry Cycles: New in-ground pool construction units decreased 3% to 5% in 2025, primarily due to cautious consumer discretionary spending and elevated financing costs.
• Weather Sensitivity: Weather is a principal external factor. Hot and dry conditions generally increase demand for chemicals and supplies. Unseasonably cool or wet weather, or extraordinary precipitation, can decrease installations and purchases. Early or late warming trends can extend or shorten the pool and landscape season, respectively.

Planning & Forecasting:

• Inventory Management: The Company typically experiences a build-up of product inventories and accounts payable during the winter months in anticipation of the peak selling season.
• Demand Forecasting: The 2026 outlook is based on reasonable expectations for industry demand, pricing, and inflationary conditions, assuming normal weather patterns. The Company does not incorporate alternative weather predictions into its guidance.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Environmental, Health & Safety: The Company is subject to a wide variety of regulations, including local fire codes and international, federal, state, and local environmental and health and safety requirements. These regulations govern the packaging, labeling, handling, transportation, storage, and sale of chemicals and fertilizers.
• Pesticide Laws: Sells algaecides and pest control products regulated as pesticides under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) and various state pesticide laws, primarily related to labeling, annual registration, and licensing.
• Employment Laws: Subject to various employment laws and regulations, including those governing minimum wage, employee classification, and other wage, labor, or workplace regulations.

Trade & Export Controls:

• Import/Export Regulations: As the Company sources certain products from outside the United States, it is exposed to major changes in tax policy, import or export regulations, other trade restrictions, or trade relations, such as the imposition of tariffs or duties on imported products.
• International Compliance: International operations expose the Company to local laws and customs, as well as anti-corruption, anti-competition, economic sanctions, and other laws governing international commerce.

Legal Proceedings:

• Material Litigation: From time to time, Pool Corporation is subject to various claims and litigation arising in the ordinary course of business, including product liability, personal injury, commercial, contract, and employment matters. Based on currently available facts, the Company does not believe that the ultimate resolution of any of these matters will have a material adverse impact on its financial condition, results of operations, or cash flows.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate (2025): 23.8%. The effective tax rate is influenced by the U.S. federal statutory tax rate (21.0%), state and local income taxes (net of federal income tax benefit), foreign tax effects, and excess tax benefits on share-based payments.
• Geographic Tax Planning: The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. U.S. income taxes are not provided on the earnings or cash balances of foreign subsidiaries, as these are historically invested or expected to be invested indefinitely to fund current cash flow needs in the countries where held.
• Tax Reform Impact: The One Big Beautiful Bill Act (OBBBA), signed into U.S. law on July 4, 2025, is not currently expected to have a material impact on the Company's income tax provision. The Global Anti-Base Erosion Model Rules (Pillar Two), adopted by several operating countries in 2024, also did not have a material effect on the financial statements.
• Uncertain Tax Positions: The total amount of unrecognized tax benefits that, if recognized, would decrease the effective tax rate was $16.5 million at December 31, 2025.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Pool Corporation is self-insured for employee health benefits, workers’ compensation coverage, property and casualty, and automobile insurance. To limit its exposure, the Company also maintains excess and aggregate liability coverage. Self-insurance reserves are established based on estimates of claims incurred but not reported and information from third-party service providers.
• Risk Transfer Mechanisms: The Company utilizes interest rate swap contracts to reduce its exposure to fluctuations in variable interest rates on a portion of its variable rate borrowings. These swaps convert variable interest rates to fixed rates for specified notional amounts and periods.